Monday, April 18th, 2011

UPDATE – Responding to Slanted Journalism at the Center for Public Integrity

Claims made today by the Center for Public Integrity (CPI) of good faith and fair-minded outreach to us don’t square with the facts. CPI obscured from readers the substance of our efforts to engage with them and so we will set the record straight here.

It’s true that writer, John Aloysius Farrell, e-mailed and called us to help him organize his article, arguing that it would be “in the long run beneficial for Koch.” But a proposed piece covering dozens of topics spanning many years obviously required a review of our own and of course a look at Farrell’s own reportage.

It soon became clear that Mr. Farrell is not an objective reporter as he had presented himself. Instead, he has for some time been a political opinion columnist who has consistently advocated views hostile to free-market principles and policy. (See here, here, here, and, here.) When we called to bring this to the attention of senior editors, Mr. Farrell e-mailed us to complain that we had “trashed” him and to renew his demand that we help him. We still have received no answer from CPI on Farrell’s apparent bias and how CPI justifies assigning him in light of that.

We also asked CPI about the backing they receive from George Soros’ Open Society Foundation, a group that is both bankrolling and taking part in politically driven attacks on Koch Industries. Readers would be right to ask if Mr. Farrell’s efforts are designed – in timing, content, and tone – to take part in that campaign. We received no reply to that concern either, although Mr. Farrell quotes his own executive director proclaiming that CPI is “non-partisan.” We also asked for the opportunity to respond in writing to any and all specifics that CPI intended to report. They did not reply to that overture either.

So, to recap, our concerns about objectivity and fairness were met with indignation. An obvious problem raised about CPI’s backers was ignored. Our request to review and react to assertions about us was also disregarded. If that’s how CPI treats basic journalism standards, readers should be skeptical of anything they publish – and not just about Koch Industries.

Here below is the final, unanswered letter we sent to CPI on April 4, 2011:


Sent: Monday, April 04, 2011 3:34 PM
To: ‘Farrell, Jack’
Subject: RE: Farrell CPI story request

Dear Jack,

We have received your requests for assistance. We have serious misgivings about your claims of objectivity, balance and sourcing for a number of reasons, not the least of which is that you have written numerous pieces that are critical of issues that Koch would support.

As you know, CPI receives substantial financial support from the same backers who are funding and organizing the partisan political attacks against Koch; the same attacks that you are echoing. How do you justify this obvious conflict of interest? Will you disclose the funding CPI receives from these groups in your story?

Further, what distinction is there between the timing, content and premise of your article and the broader attack conducted against Koch by your mutual financial sponsors?

Although you have sent us some material for review, we would insist on the opportunity to react to any assertions or disparagements made about us either by you or your sources in advance of your piece being published.

We will await a formal reply from you and your editors on the journalistic standards and conflicts of interest cited above.


Our response to the substance of the CPI article

Large companies operating in government regulated industries devote resources to lobbying activities but CPI’s sensationally titled article, “Koch’s Web of Influence” implies that our efforts are in some way exceptional in scope and purpose.

Our government and public affairs activities are based on principles of economic freedom and property rights that are core values recognized and held by the majority of Americans.

Many of the charges leveled in the CPI article are misleading and others are factually wrong.

The article calls Koch Industries “an ethanol player” and says, “Koch representatives lobbied Congress on ethanol and other biofuel subsidies.” The implication that we lobbied Congress in favor of subsidies is false.

  • Koch Industries opposes ethanol subsidies.
  • We are involved in ethanol because federal law requires us to blend ethanol with our petroleum products.
  • We oppose subsidies because they distort economic signals about price and demand and create inefficiencies that divert resources from productive activities to politically favored ones.
  • While as a philosophical matter we would prefer that there be no government mandates or subsidies, once such laws are in place we comply with them. We will not place our company or our employees at a competitive disadvantage in the mixed market economy in which we compete.

Toxic Substances
The article strongly suggests that Koch Industries devotes resources to weakening government restrictions on certain chemicals used in the manufacturing process. “Koch’s efforts to limit regulation of toxic substances illustrate the breadth of its lobbying operation.”

  • What the article calls “lobbying” is in large part actually a function of the statutory notice and comment process. Koch Industries and other organizations are invited by the EPA and other federal agencies to participate in this process.
  • Further, the “toxic substances” referred to have many useful and safe applications in our daily lives. Products like carpeting, plywood, paper towels, insulation and paints contain formaldehyde, a chemical that exists in every living cell. Through the notice and comment process, the EPA determines the level at which the substances can be used in a safe and productive manner.
  • The EPA and other agencies encourage public comment on their proposed rules because the public has a vested interest in the products it regulates, and because the input from the public provides critical insight into the effects of the regulation on the public.
  • Koch representatives also participate in the rulemaking process by sharing concerns through industry and trade groups and, on occasion, in face-to-face meetings with government officials about these important issues.
  • These contacts are lawful and ordinary; indeed, many companies, NGOs, and other interested citizens engage in similar contacts. Where required by law, all of Koch’s lobbying contacts are properly disclosed.
  • Accordingly, federal agencies make rules with input from industry, NGOs, environmental groups, and the public to ensure that regulations are realistic and workable. Take, for example, formaldehyde. If EPA rules on the level of exposure are set too low, they could have the unintended consequence of outlawing formaldehyde in useful medical applications. The EPA’s proper classification and regulation of formaldehyde has been sharply disputed for many years.
  • Several parties, including government agencies, have filed comments with EPA that raised concerns about the EPA’s proposed regulations. The National Academy of Sciences (NAS) recently challenged the EPA’s assessment of the potential health effects associated with formaldehyde exposure saying the assessment “needs substantial revision.”

Global Warming
The CPI article strongly suggests that Koch Industries is using influence in government to secure a business advantage at the expense of public safety. “It’s in the Kochs’ commercial interest to preserve America’s reliance on carbon-based energy sources.” We reject the suggestion. In the absence of reliable and cost-effective substitutes for traditional energy we believe preserving a level playing field for carbon-based sources is in the best interests of consumers and taxpayers.

  • We are interested in ensuring that energy policies are informed by sound science and economic reality.
  • Climate change is a highly politicized issue and the fact is that when Democrats controlled the White House, the Senate, and the House of Representatives, they were still unable to pass any legislation addressing the issue. This is because there was bipartisan opposition to the legislation due to the ruinous impact it would have on the fragile economy.
  • At a time when our nation needs to be focused on fiscal sanity and job creation, our opponents instead focus on climate change legislation that would destroy jobs with negligible impact on the climate. We believe the American public should know the actual global environmental value on such legislation and the true cost to the economy of implementing any carbon-restricting regulation so they can decide for themselves if any benefits justify such a cost.

According to the CPI article, Koch Industries lobbyists “spend much of their time” fighting against legislation that would tax such things as “windfall profits.” There is nothing unusual with paying the legally required amount of taxes. Like most Americans, we want to be able to keep a larger share of the money we earn, consistent with all legal obligations. But CPI’s specific claims are misleading.

  • Our lobbying efforts regarding the Bush tax cuts were not on the personal income tax rates but on the business extender provisions that were included in the bill. We were not supportive of the overall package due to the spending in the bill.
  • We reinvest nearly 90% of our earnings in the company. That is one of the factors that has made Koch Industries successful and that has allowed us to create tens of thousands of high-paying jobs here in the United States. The higher our taxes, the less we have to invest in job creating businesses.
  • We believe on principle that excessive taxes are bad for the economy because they redirect resources away from productive uses toward politically favored ones.
  • We believe the private sector can spend its money more productively than the government can.
  • We are opposed, on principle, to politically motivated distortions in the economy created by excessive taxation. However, if credits and subsidies exist, we will not put ourselves at a disadvantage with our competitors.

Terrorism and National Security
The article claims that federal Chemical Facility Anti-Terrorism Standards are a major preoccupation of Koch Industries lobbyists and that we are interested in relaxing national security standards. This is not true. Our lobbying activities are a routine part of our business operations as owners of chemical facilities subject to government oversight.

  • We supported a bill sponsored by Senator Susan Collins (R-ME) that would reauthorize the current chemical security program at the Department of Homeland Security for 3 years.
  • We, along with many other interests, did oppose House legislation that would allow the federal government to mandate what type of chemicals and processes companies need to use at their facilities.
  • We favor legislation that strengthens national security effectively in partnership with owners and producers. We do not believe national security is enhanced by having the government decide what legal substances and processes should be used by industry participants. Such an approach could harm competition without any substantive benefit to national security. Furthermore, many of the products made by industry, including industry that serves our country’s national defense needs, are made with these substances and through these manufacturing processes.

Financial Regulation
We are active in the financial markets and subject to the same oversight and regulation as other institutions that engage in similar financial activity. We are hardly alone in opposing agenda-driven financial market regulations and advocating for sensible regulation that strengthens our economy and financial markets.

  • Koch Industries did not lobby against removing the “Enron Loophole”. We did lobby to oppose capital and margin requirements on end users of derivatives and opposed being treated the same as the Wall Street banks that brought on the financial crisis and required hundreds of billions in taxpayer bailouts.
  • We do oppose eliminating LIFO and section 199 for just the oil and gas industry.
  • We do not believe the government should be picking winners and losers in the tax code. We have always advocated for eliminating market distorting subsidies and incentives and would not oppose elimination of these and other provisions if they were done across the board to all sectors.
Share |